Obama: Bush-era tax cuts for rich must end

by Julie Pace and Tom Raum - Sept. 9, 2010 12:00 AMAssociated Press

CLEVELAND - Politically weakened but refusing to bend, President Barack Obama insisted Wednesday that George W. Bush-era tax cuts be cut off for the wealthiest Americans, joining battle with Republicans, and some fellow Democrats, just two months before bruising midterm elections.

Singling out House GOP leader John Boehner in his home state, Obama delivered a searing attack on Republicans for advocating "the same philosophy that led to this mess in the first place: Cut more taxes for millionaires and cut more rules for corporations."

Obama also rolled out a trio of new plans to help spur job growth and invigorate the sluggish national economic recovery. They would expand and permanently extend a research-and-development tax credit that lapsed in 2009, allow businesses to write off 100 percent of their investments in equipment and plants through 2011 and pump $50 billion into highway, rail, airport and other infrastructure projects.

Boehner used the day of Obama's speech to propose a two-step economic-recovery plan: reducing most government spending to 2008 levels and extending the Bush-era tax cuts for all Americans for at least two years. He noted the latter proposal was backed this week by Peter Orszag, a former Obama White House budget director, even though it includes keeping tax cuts for the wealthy, which Obama opposes.

"If the president is serious about finally focusing on jobs, a good start would be taking the advice of his recently departed budget director and freezing all tax rates, coupled with cutting federal spending to where it was before all the bailouts, government takeovers and stimulus spending sprees began," Boehner said.

With Democrats in danger of losing control of the House in November, Obama is under heavy pressure to show voters that he and his party are ready to do more to get the economy moving and get millions of jobless Americans back to work.

However, none of Wednesday's proposals, nor Obama's call for allowing tax rates to rise for the wealthiest Americans, seems likely to be acted on by Congress before the elections.

Obama made one of his strongest appeals yet to allow the tax cuts passed under President Bush in 2001 and 2003 to expire at the end of the year on schedule, but just for individuals earning more than $200,000 annually or joint filers earning more than $250,000. The changes would affect dividend and capital-gains rates and various other tax benefits as well as income from wages and salaries.

But the president made the argument about more than just economic policies, saying core American values, such as hard work and individual responsibility, are at stake in the upcoming midterm elections.

"I had a single mom who put herself through school and would wake before dawn to make sure I got a decent education," Obama said.

"Michelle can still remember her father heading out to his job as a city worker long after multiple sclerosis had made it impossible for him to walk without crutches.

"Yes, our families believed in the American values of self-reliance and individual responsibility, and they instilled those values in their children.

"But they also believed in a country that rewards responsibility. A country that rewards hard work. A country built upon the promise of opportunity and upward mobility."

The president's push for legislation to save some tax cuts but not all carries its own risks.

Because all the tax breaks would expire automatically at the end of the year if Congress failed to act, that could result in sweeping increases for taxpayers at every income level, a major blow to recovery hopes and a colossal dose of blame for voters to parcel out to lawmakers and the White House.

Some influential Democrats have suggested a compromise might be necessary given the current election-year animosity between the two parties.

But, in his remarks in Cleveland, Obama strongly signaled he isn't about to sign off on any such deal.

"Let me be clear to Mr. Boehner and everyone else: We should not hold middle-class tax cuts hostage any longer," the president said. "(The administration) is ready this week to give tax cuts to every American making $250,000 or less."

It was a slight misstatement of his own position, because the $250,000 would apply to household income. The threshold for individuals would be $200,000.

Republicans and some Democrats argue that the fragile state of the economy makes this a poor time to raise taxes on anyone and that increases could stifle wealthier people's appetite for spending.

The Washington Post and Tribune Washington Bureau contributed to this article.